The paper provides a model of household consumption and portfolio allocation which incorporates housing as both a consumption good and a component of wealth. Household utility depends, possibly nonseparably, on two goods: nondurable consumption, which is costlessly adjustable, and housing, which...

The paper proposes an instrumental variables version of the Huber estimator as an alternative to the IV-Krasker Welsch estimator. The IV-Huber estimator is analytically and computationally much simpler than IV-Krasker Welsch. In the context of an empirical study of the importance of borrowing...

A. S. Deaton's (1987) observation that consumption appears to be 'too smooth' is easily reconciled with the notion that consumption exhibits 'excess sensitivity' to current income. The reconciliation invokes the plausible assumption that households forecast on the basis of a larger information...